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The happiness was short-lived. Sanctions will cut SMIC’s revenue and profits in 2021
04.02.2021 [20:15],
Gennady Detinich

The largest Chinese contract manufacturer of chips – SMIC – reported on work in the fourth quarter of 2021, reported on work for the year as a whole and issued a forecast for 2021. The company did not say anything bad about work in 2021 – the business was flourishing, but the inclusion of SMIC on the US “special” list a couple of months ago will make 2021 a year of uncertainty for it, both in terms of revenue and profit.

Image source: Reuters

To begin with, we will inform you that SMIC’s revenue for the last quarter of 2021 in annual comparison increased by 10.3% to 6.671 billion yuan ($ 1.03 billion). At the same time, gross profit decreased by 5.8% to 18%. Net profit of the company for the reporting quarter sequentially (in quarterly comparison) increased by 93.5% and amounted to 1.252 billion yuan ($ 193.85 million).

The company explains the significant growth in revenue and profit in the fourth quarter by an increase in average prices for products and an increase in revenue from contract orders (an increase in the number of sold plates with chips). The company also notes “an increase in funding for government projects” and an unusually high return on investment, as well as the correct management of financial assets.

For the full year of 2021, SMIC’s revenue increased by 25.4% to 25.250 billion yuan ($ 3.9 billion), and gross profit increased by 7.1%, to 23.6%. The company’s net profit for 2021 reached 4.627 billion yuan ($ 716.43 million), or 204.9% more than in 2021.

The inclusion of the company on the US sanctions list, or rather, on the list of companies for which Americans and their allies need a special license from US regulators to work with, makes SMIC cautiously forecast the likely profit in 2021. Thus, the company believes that in the first quarter, revenue will grow from 7% to 9% in annual terms. In general, in 2021, revenue can grow from 5% to 9%. This is much more modest than in 2021, although all analysts consider 2021 to be favorable for the semiconductor industry.

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